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The Bank of Japan finally determined the Japanese people have suffered enough deflation as punishment for the bubbly 1980s economy. New central bank boss Haruhiko Kuroda announced the BoJ will aim to double the monetary base over two years by purchasing long-term bonds, exceed market expectations. How does this compare to the Fed’s bond-buying program? The Financial Times:

Under the new measures, the BoJ will expand its balance sheet by 1 percent of gross domestic product each month this year and by 1.1 percent per month in 2014, according to estimates from Barclays. By comparison, the US Federal Reserve’s current monetary easing programme involves increasing the balance sheet by 0.54 per cent of GDP per month.

In doing this, the BofJ is belatedly following the 1990s advice of Milton Friedman who urged the nation’s central bank to boost the money supply by buying government bonds on the open market. “Higher monetary growth will have the same effect as always,” Friedman wrote. ” After a year or so, the economy will expand more rapidly; output will grow, and after another delay, inflation will increase moderately.”

The stock market actually rose over 4% on the news, as it was down sharply right before the announcement. And of course the decision was widely expected, so the market response merely reflects the extent to which the bond purchase was larger than expected. It makes more sense to look at the stock market reaction since Abe first stunned the markets with a 2% inflation target proposal, while running for office in mid-November 2012. The Japanese stock market is up 45% since that announcement. The yen is down roughly 20%. … More proof that fiat money central banks are never “trapped” by anything other than their timidity.

Now that he has embraced Prime Minister Shinzo Abe’s anti-deflation mandate, Kuroda must stand ready to do more. His new strategy is hyper-aggressive by Japanese standards, but the U.S. Federal Reserve’s balance sheet has tripled since the 2008 collapse of Lehman Brothers. Kuroda could resurrect equity-buying, which the BOJ experimented with in 2002 and 2009.

Advanced economies — at least the US and Japan — are finally figuring this thing out by rediscovering Friedman. Tax-heavy fiscal austerity combined with tight money is a growth killer. Inflation isn’t everywhere and always a problem. And recessions don’t need to be morality plays where some must suffer for their supposedly irrational exuberance and “malinvestment.”